Speaking at the Press Club, Mr Combet says science has proved the world is warming and that carbon pollution is the cause.

"No government acting in the national interest can ignore such advice. We have a public policy responsibility to reduce carbon pollution," he said.

However, he did not put a figure on the carbon tax.

"Our commitment is that more than half the revenue will be used for household assistance, and that holds for the first year and over a period of years," he said.

He said details on fuel and transport will be announced down the track.

"I'm indicating very clearly that we understand the pressures that petrol prices represent for households and we'll be articulating the way in which we will deal with that when we produce the detailed package," he said.

Mr Combet also outlined the types of changes a carbon price can deliver for industry.

"Promoting more low emissions gas-fired or renewable electricity generation instead of coal-fired electricity generation and an incentive will be provided for households and businesses to use energy more wisely," he said.

"At $20 in the steel industry, the average carbon price after 94.5 per cent assistance for the core pollution intensive activity would be around $2.60 per tonne of steel out of a price per tonne of steel of around $800," he said.

"In the aluminium industry, the average carbon price after assistance for the core pollution-intensive activity would be around $18.70 per tonne of aluminium out of a price of around $2,500 per tonne of aluminium.

"In other words, the carbon cost relating to the core pollution activity for steel would be one-third of 1 per cent of the value of a tonne of steel and three-quarters of 1 per cent of the value of a tonne of aluminium."

'National interest'

Mr Combet argued there were six reasons for urgent action to reduce carbon emissions.

"Australia is one of the world's top 20 polluters and we release more pollution per person than any other country in the developed world - more than the US.

"Not only is it in our national interest to act, we have a responsibility to do so.

"To tackle climate change we need to cut our pollution levels, something that many other countries are also doing."

Mr Combet said the most efficient way of cutting pollution was through a carbon price which would drive investment into alternative power sources.

"Less than 1,000 companies that are the largest polluters in our economy will be required to purchase a permit for every tonne of pollution they emit. The price of the permit is the carbon price.

"Households will receive generous assistance to meet costs that may be passed on by the large polluters - pensioners and low- and middle-income households will be a priority.

"Finally, demand for clean energy will grow because it will become cheaper relative to the current cost of burning coal for electricity. A carbon price will provide greater certainty for investors to commit investments in clean energy."

'Monumentally bad'

Opposition Leader Tony Abbott says the policy is a bad tax based on a lie and called it "monumentally bad".

"It will not necessarily reduce pollution but it will certainly raise the cost of living for families," he said.

"The only thing that we do know for certain is that in the Treasury paper leaked a week ago, that the average family will be $860 worse off under the carbon tax, and that's just for starters.

"This argument is not about climate change as much as it's about the best way to deal with it. There is a much better way to deal with it than the Government's.

"There is a dumb way and a smart way to deal with climate change - the dumb way is to tax everything. The smart way is to take direct action."

Mr Combet says in order for the legislation to come into effect from July 1, 2012, he is planning on introducing the legislation to Parliament in the third quarter of this year.